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Major Questions Surrounding GoDaddy's Second IPO Attempt

Like the tag line on its official website says,“it’s go time” for the web hosting provider GoDaddy, as the company has officially begun the process to step into the public market with an IPO.

The Scottsdale, Ariz.-based company filed with U.S. regulators on June 9 to raise up $100 million in an initial public offering of Class A common stock. Details like the number of shares and price range will be provided closer to the IPO.

At the time of the filing, GoDaddy officials announced that the company would use the money generated in the deal to repay debt and for general corporate purposes. Morgan Stanley (MS) ,JPMorgan Chase & Co. (JPM) , and Citigroup Inc. (C) were named as the lead underwriters on the deal.

It’s the second time GoDaddy has filed to go public. The company’s first IPO attempt went back to 2006, but failed because of unfavorable market conditions.

Private equity firms including KKR & Co LP (KKR) and Silver Lake bought into GoDaddy in 2011 for $2.25 billion, gaining a 28 percent stake in the company. In between IPO attempts, Technology Crossover Ventures acquired a 12.6 percent stake of their own in GoDaddy as well.

Eight Years Have Passed Since Last IPO Attempt– But What Has Changed?

In its IPO filing, GoDaddy reported that the company managed more than 57 million domains and had 12 million customers as of March 31, 2014. Its user base has been growing approximately 13 percent since the same period one year earlier. The company derives most of its revenues from selling the domains and web-hosting products.

Though GoDaddy has recently posted strong user growth, several troubling figures may undermine the company’s IPO path. Despite the company’s revenues have increased 24 percent since 2012, it is not the profitable moment. GoDaddy posted a net loss of $200 million on revenue of $1 billion in 2013, comparing with a net loss of $279 million on revenue of $979 million in 2012. In the most recent quarter, GoDaddy had another net loss of $51 million on revenue of $320 million. While GoDaddy is narrowing its losses, the truth is this 17-year-old company is still losing money ahead of its IPO.

In addition, investors may watch out the company’s ownership structure and its management changes. KKR & Co. LP, Silver Lake, and Technology Crossover Ventures own more than 40 percent stake in GoDaddy. Founder Bob Parsons and his investment group own 28.1 percent of the company’s Class A stock. According to a filing on June 9, Parsons resigned as executive chairman, though he will remain on the board, to “devote more time to his ventures outside of GoDaddy.”

A Little Upisde, But Still Not Enough

Another major sector that GoDaddy’s future investors likely take notice is the tax assets. GoDaddy may have built up vast tax assets for the previous losses from 2011 to March 2014 of $854 million in total. Assuming a tax rate of 35 percent, those losses could be used to offset approximately $300 million in taxes, which would be a boost to the company one day. But GoDaddy has not generated any taxable income, so it’s hard to say when the tax assets could be used.

Here’s the good news. There’s a slow but steady growth in the company’s user base. It total number of registered websites has also increased, reaching 1.4 million bookings as of March 2014. The company also sees business potential in selling the hundreds of new top-level domains that will soon be available with the approval of the Internet Corporation for Assigned Names and Numbers.

GoDaddy may be proud of its growing user base and other merits. But until the company actually starts making profits, it may be safe for investors to watch the stock from the sidelines.

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